Missouri Reopens and Expands MODESA and Creates Innovation Zones

HB 3231 Rebuilds the State’s Development Toolkit 

States periodically overhaul their economic development statutes to give cities new tools for large redevelopment projects. In July 2026, Missouri enacted one of the year’s more expansive packages, reopening and expanding a long-limited redevelopment program and layering on a new, place-based incentive framework aimed at downtowns and high-value growth.

For developers and companies weighing Missouri — particularly for downtown redevelopment, office conversions, and large mixed-use projects — the legislation reopens financing tools that had been closed to new projects for years and creates new ones. Understanding what the law authorizes, and what still has to happen before the incentives can be claimed, is the starting point.

Recent Program Activity: What Changed

On July 13, 2026, Governor Mike Kehoe signed House Bill 3231, the Missouri Innovation, Public Safety, and Accountability Act — a broad package that reworks several of the state’s development programs. It generally takes effect August 28, 2026, though several of the tax-credit provisions apply for tax years beginning on or after January 1, 2027. Two components stand out for site selection: the reopening and expansion of MODESA and the creation of Innovation Zones.

MODESA Reopened and Expanded

The law expands MODESA, which had been closed to new project applications since January 1, 2013, even as previously approved projects continued to receive benefits. MODESA supports large redevelopment projects by capturing a portion of new state and local tax revenues — above an established baseline — to help fund eligible project costs. HB 3231 broadens the tool by easing prior eligibility constraints (such as household-income and building-age limits), expanding the areas that can qualify, and extending project durations, and it reopens the program to new development projects on or after August 28, 2026 — reportedly limited to two new developments per municipality — with no new development-project approvals after December 31, 2032 and no new expanded-development-project approvals after January 1, 2037.

Innovation Zones Created

HB 3231 also lets an eligible city designate one contiguous, certified Missouri Innovation Zone (no larger than 10 percent of the city) by submitting a master plan to the Department of Economic Development, which must act within 45 days; incentives cannot be used until the zone’s certification is finalized. Projects within a certified zone can access a package of incentives, including an office-to-residential conversion incentive for eligible conversions in a certified zone (or a qualifying Missouri Main Street district), scored under a statutory master scorecard and available for tax years beginning on or after January 1, 2027 — with credits of up to 25 percent of qualified conversion expenditures, an enhanced rate of up to 30 percent reserved for upper-floor housing in a qualified Missouri Main Street district, and a $50 million annual statewide cap (half reserved for buildings over 750,000 square feet, with a portion for Main Street upper-floor housing). The framework also includes a withholding-retention incentive under the Missouri Works program for firms that maintain payroll in the zone, a state-level “Missouri Opportunity Zone” income-tax deferral for qualifying in-zone reinvestment, an employer-relocation incentive under Missouri One Start, a Missouri angel-investment incentive, and — because certified zones qualify as redevelopment areas — local tax-increment financing and property-tax abatement.

Program Overview: How the Tools Fit Together

The expanded MODESA and the new Innovation Zone incentives may be complementary on large, capital-intensive redevelopment, depending on each project’s eligibility — the programs have separate designation, approval, funding, and compliance rules, and the conversion credit includes anti-duplication provisions. MODESA provides a revenue-capture mechanism to help close financing gaps on major projects, while the Innovation Zone package adds targeted credits and deferrals aimed at specific outcomes — most notably converting underused office space into housing and retaining employers within a defined district.

The office-to-residential conversion credit is especially timely given the national challenge of vacant downtown office buildings, and the reservation of part of the annual cap for the largest buildings signals an intent to move significant projects. Because the incentives are place-based, their value depends heavily on whether a project sits within a designated zone.

What Companies Should Do

Much of HB 3231’s benefit cannot be claimed immediately. Several incentives require the Missouri Department of Economic Development to complete rulemaking, and the Innovation Zone tools depend on a city first designating a zone and securing approval of a master plan. Developers and companies should therefore track both the state rulemaking process and local designation activity in the cities where they are active.

In the meantime, sponsors of downtown redevelopment, office-conversion, and large mixed-use projects should assess how MODESA and the Innovation Zone incentives could apply to their plans, and position projects to take advantage of the tools as implementation details are finalized.

How SSG Can Help

Site Selection Group helps developers and corporate occupiers evaluate state and local incentive programs and structure projects to capture available benefits. We monitor legislative and rulemaking developments like Missouri’s, assess how new programs apply to a specific project, and help clients coordinate with the agencies and localities that administer them.

If your organization is planning a redevelopment, office conversion, or growth project in Missouri, contact SSG to understand which programs could apply and how to position for them.

Program details verified against primary sources as of August 1, 2026. This article is provided for general information and does not constitute tax or legal advice.